Brisbane tunnel project awarded to RiverCity Motorway

A consortium backed by ABN AMRO has been appointed to construct the A$2 billion north-south bypass tunnel.
After a bidding process that began 12 months ago, the RiverCity Motorway Consortium has been handed the contract to build a tunnel under Brisbane, the state capital of Queensland, Australia.

It is the largest infrastructure project to be awarded since ConnectEast picked up the A$3.3 billion construction of the Mitcham Frankston toll way in Melbourne. A deal backed by both ABN AMRO and Macquarie Bank.

This time the two banks were in competition and ABN AMRO beat a Macquarie Bank-led group to the finish line.

The RiverCity Motorway group û containing ABN AMRO, Leighton Contractors, Baulderstone Hornibrook and Bilfinger Berger Concessions û will now build a five-kilometre long tunnel under the Brisbane River. It is the first privately funded toll road in the city.

ABN AMRO acted as joint financial advisor, and is also arranging the debt and equity components of the financing.

The bank will underwrite an IPO of securities in RiverCity Motorway to be listed on the Australian Stock Exchange and offered to institutional and retail investors in about three weeks time.

It is not clear yet how much will be raised in the equity markets or how the debt component will be structured. ABN AMRO expects to release more information about that early next week.

Financial close for the project is expected in July, with work on the tunnel due to commence in August. The tunnel will be operational by 2010.

Macquarie BankÆs losing consortium called BrisConnections consisted of itself, Thiess, John Holland and Hochtief. Brisbane City Council reckons that both bidders spent as much as A$20 million on their tender submissions.

The deal was announced Thursday, the same day the Australian ContractorsÆ Association released a survey criticizing the high cost of bidding for public tenders.

The survey of 190 construction industry stakeholders, conducted in conjunction with law firm Blake Dawson Waldron, found that bid costs are becoming comparable with profit margins, leaving constructors and subcontractors with little room for error.

Nearly 70% of respondents said constructors commonly accept risks which are outside their control. And that these risks are then passed on to banks.

One banking respondent commented: ôSometimes clients have the wrong expectation of banks when it comes to risk allocation. They see us a dumping ground for risk. Projects are more successful when risks are parked with those parties who can best handle the risk.ö
¬ Haymarket Media Limited. All rights reserved.
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